http://www.dailymail.co.uk/news/article-2022993/Capitalism-crisis-80-years-ago-banking-collapse-devastated-Europe-triggering-war.html
I think the following quote summarizes much of my current thinking
about economics.
Barry
"At bottom, capitalism is as much a moral enterprise as it is an
economic one. If those lucky enough to become successful ignore the
virtues of thrift, self-discipline and sobriety, as well as the moral
imperative to look after the weak, then capitalism degenerates into
cronyism and self-interest."
Article to follow....
Capitalism in crisis, a warning from history: Eighty years ago, a
banking collapse devastated Europe, triggering war. Today, faith in
the free markets is faltering again
Last updated at 6:03 PM on 6th August 2011
Exactly 80 years ago, international capitalism stood on the verge of
meltdown.
The collapse of the banking system in the summer of 1931 sent
shockwaves through Europe, bringing governments to their knees and
thousands out onto the streets.
In the United States, an increasingly careworn president and his
congressional critics fought a bitter battle over government spending
and tax rises.
The collapse of the banking system in the summer of 1931 brought
governments to their knees and thousands out onto the streets
(Pictured: the Jarrow March)
And in Britain, with the Labour government broken by the economic
crisis, a Conservative-dominated coalition imposed the deepest
spending cuts in a generation, slashing benefits in an attempt to
restore confidence in the nation’s finances.
With the banks refusing to lend, and millions of people thrown out of
work, capitalism itself seemed utterly discredited.
In other countries, many turned to the far Right, swelling the ranks
of the Nazis and their allies.
In Britain, a generation of intellectuals turned their backs on
capitalism, placing their faith in the utopian idealism of Soviet
Communism and closing their eyes to the horrors of Stalin’s barbaric
regime.
For decades afterwards this extraordinary historical moment — when
capitalism itself appeared to have failed — was forgotten, and looked
like the stuff of ancient history.
But in the summer of 2011, with the eurozone in chaos, the British
economy stagnant and the U.S. crippled by debt, with social mobility
at a standstill and millions of ordinary families squeezed until they
can barely breathe, it feels disturbingly familiar.
In the past two days alone, stock markets have been in free-fall
across the capitalist world. With investors manifestly losing
confidence in Spain and Italy, two of Europe’s biggest economies, a
second devastating world recession cannot be ruled out.
Although the share-price plunge does not yet come close to the
infamous Wall Street Crash of 1929, this week’s market mayhem is a
chilling reminder of the sheer fragility of the capitalist system.
If the worst happens, if Spain and Italy go down and the euro
crumbles, then the world economy really will be in trouble.
Only 20 years ago, the capitalist West was congratulating itself on
victory in the Cold War. The Berlin Wall had come down, the Soviet
Empire had broken up, and American intellectuals were even proclaiming
the ‘end of history’.
Marxism was dead and capitalism triumphant, or so we were told. Having
lifted millions in the West out of poverty, having showered them with
goods and opportunities, the free-market system could do no wrong.
Today, the picture is very different. For although the Left has never
recovered from the fall of the Soviet Union, capitalism has rarely
seemed in a more desperate condition.
Last year Barclays boss Bob Diamond pocketed an incredible £6.5
million - and that's on top of his £8 million-plus annual pay package
And with bankers still pocketing gigantic bonuses and Europe swept by
a wave of austerity, even the Right are beginning to wonder whether
the system is intolerably loaded in favour of rich metropolitan elites.
Only last week, for example, the Tory MP Douglas Carswell suggested
that ‘the free market all too often turns out not to be a free market
at all, but a corporatist racket for the few’.
Modern Conservatives, he said, should be ‘as suspicious of Big
Business and Corporatism as we have been of Big Government’.
On the surface, this may sound shocking. Yet when you dig a little
deeper, it is not hard to see why so many people have lost faith in
the free market.
The entire premise of the capitalist system, after all, is that in a
free market, hard work will produce its own reward. For capitalists,
the important thing is equality of opportunity. If you put in the
effort, then you can be whatever you want to be, regardless of your
background.
So when Margaret Thatcher, one of capitalism’s most passionate
champions, ran for the Tory leadership in 1975, she defined her values
as ‘the encouragement of variety and individual choice, the provision
of fair incentives and rewards for skill and hard work, and a belief
in the wide distribution of individual private property’.
And when she walked into Downing Street four years later, she promised
to ensure that ‘hard work pays’.
But you do not have to be a card-carrying Left-winger to see why
millions of people — not just in Britain but across the world —
feel completely cheated.
When most of us contemplate the results of the bankers’ greed, for
example, talk of ‘fair incentives and rewards’ seems a sick joke.
In every corner of Europe, ordinary families, through absolutely no
fault of their own, are paying an intolerable price for the outrageous
avarice of the financial elite.
Recent figures show that City bonuses came to a staggering £14
billion last year, with one executive, Barclays boss Bob Diamond,
pocketing an incredible £6.5 million — and that’s on top of his
£8 million-plus annual pay package.
When she walked into Downing Street, Margaret Thatcher promised to
ensure that 'hard work pays'
Yet at the same time, banks are refusing to lend to ordinary families
and small businesses.
Indeed, last month the banks actually took in as deposits £3
billion more than they lent, which goes a long way to explaining why
growth is virtually non-existent.
‘No wonder economic growth is barely visible to the naked eye,’
remarked the Coalition’s former Treasury spokesman, Lord Oakeshott,
‘when the banks keep sucking billions out of the economy.’
These are, incidentally, the same banks, such as RBS and HBOS, that
British taxpayers had to save from the consequences of their own
reckless gluttony.
Three years ago, the Government spent £500 billion to bail out the
collapsing banking system. And now, while the bankers toast themselves
with vintage champagne, the rest of us are picking up the bills.
But the bankers’ greed is only one symptom of a wider malaise. The
stark truth is that millions of ordinary families feel the system
gives them no chance of success.
The facts are simply unanswerable. A child born in 1971 has less
chance of moving up the social ladder than one born in 1951.
On top of that, the gap between rich and poor has grown steadily since
the 1970s, with some of the biggest increases coming during the 13-
year New Labour regime.
Half a century ago, during the Fifties and Sixties, grammar schools,
job opportunities in manufacturing and the death of deference meant
that working-class children felt they had a decent chance of getting on.
And in their different ways, state-school educated prime ministers
such as Harold Wilson, Ted Heath, Jim Callaghan, Margaret Thatcher and
John Major gave the impression that anybody could make it, regardless
of their background.
Even in 1931, during the last great crisis of capitalism, Britain was
run by a prime minister, Ramsay MacDonald, who was the illegitimate
son of a Scottish labourer and a poor housemaid. At a time when it
would have been easy to imagine that power belonged exclusively to the
rich, MacDonald was a shining example of social mobility.
Nobody could possibly look at our leaders and draw the same conclusion
today.
From Cameron, Clegg and Osborne — respectively the son of a
millionaire stockbroker, a banker and the heir to a baronetcy — to Ed
Miliband and Ed Balls, one the son of a North London intellectual, the
other the privately educated son of a professor, British politics has
become the plaything of a tiny self-regarding elite, totally out of
touch with ordinary families.
Looking at our political class, you begin to suspect that modern
capitalism is loaded in favour of those who already enjoy wealth and
power. It has become a closed system, impossible to penetrate unless
you are incredibly lucky.
Other facts tell a similar story.
As the Tory minister David Willetts showed in a provocative book last
year, Britain’s youngsters are being cut adrift. Thanks partly to
ferocious competition from Eastern European immigrants, workers in
their 20s today earn far less than their parents did at the same age.
And with house prices having soared and banks refusing to lend, they
find it impossible to get onto the property ladder.
As a result, the old Conservative dream of a ‘property-owning
democracy’ is increasingly reserved for the silver-haired.
Most experts recognise that home-ownership is one of the keys to a
stable, prosperous, hard-working society — yet since 1997, home
ownership among people in their 20s has steadily fallen.
Of course there was a time when education offered a leg-up: but those
days are becoming a fading memory. Thanks to the unforgivable
abolition of the grammar schools, the gap between private and state
education has become a chasm.
In a country that claims to value competition, it is nothing less than
a disgrace that just four expensive private schools — Eton,
Westminster, St Paul’s, St Paul’s Girls — send as many students
to Oxford and Cambridge as 2,000 state schools put together.
Meanwhile, the Government’s education reforms mean that working-class
children face the prospect of paying back £9,000 a year in tuition
fees if they choose to go to university.
And this, of course, comes at a time when fat-cat vice chancellors,
already rewarded with grace-and-favour residences and boundless
expense accounts, are being paid an average of more than £220,000 each.
On holiday in Tuscany — something well beyond most British families
— perhaps David Cameron should spend an afternoon with his great
predecessor Benjamin Disraeli’s book, Sybil.
In this work, first published in 1845, the greatest Tory statesman of
the Victorian era warned that Britain had become ‘two nations … who
are as ignorant of each other’s habits, thoughts, and feelings as if
they were dwellers in different zones, or inhabitants of different
planets; who are formed by a different breeding, are fed by a
different food, are ordered by different manners, and are not governed
by the same laws: the rich and the poor’.
Disraeli was no socialist. But as an outsider himself, born into a
Jewish family, he recognised that capitalism could only take root in
ordinary people’s hearts and minds if it gave them a stake of their
own.
At bottom, capitalism is as much a moral enterprise as it is an
economic one. If those lucky enough to become successful ignore the
virtues of thrift, self-discipline and sobriety, as well as the moral
imperative to look after the weak, then capitalism degenerates into
cronyism and self-interest.
At its best, the free market is a tremendous liberating force. During
the Fifties and Sixties, it gave millions of people opportunities
their parents could barely have imagined: happy childhoods, good
schools, well-paid jobs and contented retirements.
On holiday in Tuscany - something well beyond most British families -
perhaps David Cameron should spend an afternoon with his great
predecessor Benjamin Disraeli's book, Sybil
But when capitalism fails, as in the 1930s, then it allows extremism
to thrive.
During that unhappy decade, some were bewitched by the false promise
of Stalinist Russia; others flocked to the blood-drenched banners of
the Far Right.
Eighty years on, capitalism has once again lost its way. With millions
betrayed by their under-performing schools, locked out of the job
market, forgotten by the banks and abandoned by their politicians,
Britain is in danger of becoming two nations again.
Modern capitalism is not beyond redemption. But it badly needs to
rediscover its moral dimension, lost amid the scramble to protect the
privileges of a narrow metropolitan elite.
It is time that our politicians cracked down on non-domiciled
billionaires, and time they made sure the rich elite paid their fair
share of our national tax bill.
And if David Cameron really wants to rekindle the British people’s
faith in the capitalist system, then he should go further. He should
force the banks to lend more money to individuals and small
businesses, getting our economy moving again.
He should restore a culture of competition and excellence to our state
schools, giving working-class children a genuine sense that they can
climb the ladder. And he should make it a priority to encourage real
jobs in real businesses, reinvigorating a manufacturing sector that
has been abandoned for far too long.
The stakes could not be higher. Unless capitalism opens its arms to
the common man, then an entire generation will conclude that it is no
more than a fig leaf for the super-rich.
That would be a tragedy. For despite all capitalism’s weakness —
despite the flaws, inequalities and hypocrisies that are an inevitable
part of any human endeavour — it remains the only way to promote real
and lasting opportunity.
Other systems have been tried, and they have collapsed in bloodstained
ruins. Only capitalism — the free exchange of goods, skills, services
and ideas — has proved itself true to the instincts of human nature.
Today, we can only hope that capitalism’s champions learn the lessons
of history.
For if they fail, then the results could be too dreadful to contemplate.
Read more:
http://www.dailymail.co.uk/news/article-2022993/Capitalism-crisis-80-years-ago-banking-collapse-devastated-Europe-triggering-war.html#ixzz1UO1xowqN
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